Getting Executive Appointments Right - Diversity and Culture Fit
Every hiring decision is important, but executive hires carry with them more weight than most. Hiring the right person for an upper management role can mean wonderful things for company morale and the bottom line, whereas hiring the wrong person can mean major headaches. While skills and experience are, of course, important, there are two other factors hiring managers need to consider as they look for candidates for executive level positions: diversity and culture. By taking both of these into account, you can better ensure that your executive appointments will thrive, and help your company do the same.
First let’s look at the importance of diversity. There’s a lot of discussion today about the importance of diversity in the workplace, and many companies are taking steps to diversify their employee makeup. But despite the laudable efforts to hire more women, minorities, and others of different backgrounds, most organizations still haven’t done anything about diversity at the executive level — and that’s a big problem.
When the higher-ups in a company all look and think the same, it can create a culture of conformity and hinder innovation, even if the lower-level staff is very diverse. This is a major problem for companies looking to stay competitive in a changing marketplace. A homogenous executive team is also probably disconnected from the companies they serve; in this new market of authenticity, people want to buy from companies who they relate to, and whose values they share, so the executive team needs to reflect the customers you serve.
All of this isn’t just theorizing: a McKinsey & Co study showed that there’s a significant correlation between financial performance and the diversity of the leadership bench. According to the study, companies in the top quartile for gender diversity are 15% more likely to to have financial returns above the industry average, as compared to companies in the bottom quartile. When it comes to ethnic diversity, the numbers are even more striking: companies in the top quartile for ethnic diversity are 35% more likely to outperform the industry average than their less diverse counterparts.
Now that it’s clear how important diversity is for executive level appointments, let’s look at the second component: culture. Getting the right culture fit matters greatly, because missing the mark means that you’re likely to have high turnover in these important leadership positions — which does serious damage to productivity and morale. According to the Harvard Business Review, 40-60% of new management hires fail within 18 months, while The Corporate Leadership Council reports that up to 50% of new executive hires fail during the same time period. The main reason for this failure? It’s not lack of skills or poor performance; it’s a culture mismatch.
It’s important to define what we mean by a culture fit. Many people think of it as “Do I like this person? Would I want to spend time with them outside of work?” But this is exactly the wrong way to look at it; in fact, viewing company culture through that lens is likely to undermine any diversity efforts, as you’ll hire people who are similar to you. Rather, the aspect of culture to focus on — the thing that will determine a new hire’s success — is a match in terms of working style. HBR refers to this as “network fit,” defined as fitting the way a new hire fits with the way his or her new colleagues work. According to their research, focusing on this type of culture fit can improve performance by 30% at the two-year mark.
It’s clear that both culture and diversity are incredibly important for finding and retaining the right executive candidates, as well as for keeping your company competitive and improving the bottom line. So where do you begin? The best first step is to do an objective self-assessment, evaluating the current diversity of your leadership bench and defining the cultural values that are essential to your workplace. Once you know where you are, you can more easily see where you need to go and develop a plan for moving forward.